AvidXchange Eyes $20B Need for Supplier Invoice Finance

Accounts payable (AP) automation is but part of the equation in the drive to modernize B2B.

To that end, AvidXchange, focused on middle-market firms – specifically, how they send, receive and manage payments – said in its S-1 filing that tens of billions of dollars in revenue potential lie within B2B payments still tied to the paper check.  Suppliers, in the meantime, are finding value in supplier invoice financing activities.

In terms of the mechanics, the company said that in its core B2B payments business, suppliers submit invoices to the two-sided platform, buyers approve the invoices, there’s integration with accounting systems, buyers approve the payments and payments are executed through the network, using the methods preferred by the suppliers.

At the end of FY 2020, the company said there were more than 7,000 buyers on the platform, with more than 700,000 suppliers paid, cumulatively, from 2015 to 2020. About 53 million transactions were processed in fiscal year 2020.

“The B2B payments market is rapidly evolving and represents a significant opportunity for digital transformation,” the company said in its filing, where paper checks account for roughly 42% of the $25 trillion spent on B2B payments annually. The filing quoted PYMNTS’ own data that found 46% of AP professionals would like to implement digital AP automation solutions.

Read also: Automation Set to Shred Paper Checks

“We believe based on our analysis that our current addressable market includes approximately 435,000 U.S. middle-market businesses, and represents a significant and underserved revenue opportunity for future growth,” said AvidXchange. Those firms are defined as companies with between $5 million to $1 billion in annual sales. The firm estimated that there is more than $20 billion in addressable revenue opportunities on an annual basis across both AP automation solutions and B2B payment transactions.

But beyond those core B2B functions, the firm estimates that it can become a strategic partner for suppliers seeking better cash flow management.

Supplier Invoice Finance

“We believe there is a large unmet need in supplier invoice finance, with close to half of the market underserved,” said AvidXchange.

The company pointed specifically to its solutions, particularly its Invoice Accelerator offering, which allows invoices to be paid in tandem with factoring activities earlier than their due date. The market for those solutions represents an additional $20 billion in addressable opportunity. As suppliers use that solution, the company said, revenues are generated on a per-transaction basis for each payment that is advanced. Invoice purchases are funded from the company’s balance sheet.

Consolidated revenues surged by 33% year over year for the six months that ended in June 2021 to just under $114 million.  Losses from operations narrowed slightly to $31.8 million from $35 million in the comparable year-ago period.